The last decade of building digital startups and tech ecosystems across Africa has focused around local hubs in big cities, usually led by accelerator and incubator programs. In many cities, especially in the early days—when internet infrastructure, talent, and capital were even scarcer than they are now—aggregating demand in one location under the roof of an accelerator hub was incredibly important.
Such hubs are still important in most markets, where startups led by young entrepreneurs with big disruptive ideas need all types of support in mostly tough business environments. But as important as some of these programs have been for raising awareness and encouraging entrepreneurial and talent development, there have been concerns. A startup founder based in Lagos, Nigeria I spoke with this week felt some programs were more concerned with their own survival than enabling access to funds to help startups take the risks needed to survive.
This founder is not alone in thinking that way. African startup founders at the World Bank’s XL Africa program said many see regional and corporate accelerators as just offering “superficial access to mentorship and investor networks, resulting in few startups landing investments and disenchanted investors.”
That’s a problem when you consider a survey by the Global Accelerator Learning Initiative (GALI) that shows one of the primary reasons African startups look to these incubators and accelerators is for funding. The survey included 2,568 early-stage ventures at 55 different programs in sub-Saharan Africa from 2013 to 2016.
It turns out most early-stage startups in sub-Saharan Africa are not that different from their global peers according to GALI, which surveyed 8,666 startups globally. The top two startup sectors in Africa were agriculture and education, respectively, while globally, the order was flipped.
There were a few notable differences between African and global startups. For example, while 55% of African startups already had revenue, the number was 43% globally. Also, 70% of African startups had employees while globally just 59% did. And yes, more global startups had equity funding, at 16% versus 11% for African startups. That’s likely a reflection of the tougher market environment and startup founders feeling more under pressure to show “results” or at least prove that there are real customers willing to pay for their services.
It’s also perhaps unsurprising in African countries—where the cost of administrative staff is relatively low and the cost and availability of technology infrastructure is relatively high—founders are probably more likely to employ people than in more advanced markets where automation and technology might help reduce these numbers.
The other worthy note is that early-stage startups in sub-Saharan Africa have a better gender balance than their global peers.
The way accelerators and incubators enable innovative entrepreneurship is not necessarily broken but it does need tweaking and updating to ensure they’re staying in touch with market needs in 2018 and beyond. Organizations like the World Bank, African Business Angel Network, and others are looking at ways to tweak programs and partnerships to get more out of what are still very important fixtures of Africa’s young tech ecosystems.
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